Brazil boosts analysis of risks to public finances

Brazil has beefed up the way it assesses risks to its public finances after the International Monetary Fund identified “weaknesses” in planning.

Amid deteriorating economic conditions, the country’s treasury has expanded the “fiscal risk statement” (FRS) that it publishes annually alongside the budget to highlight threats to the public accounts posed by state enterprises, sub-national authorities and changing macroeconomic conditions.

The move – which includes the creation of a dedicated treasury team to monitor fiscal pressures – highlights the growing importance of understanding and managing risks that could derail the public accounts during economic downturns.

Brazil has been a pioneer of greater budget transparency within Latin America, and has published its annual FRS since 2002 in what was seen during its first decade largely as a bureaucratic exercise at a time of economic growth.

The country enjoyed stable and favourable international and domestic conditions that included high commodity prices, controlled inflation, and federal and local governments strongly committed to ensuring primary surpluses.

However, since 2014 Brazil’s economy has deteriorated as commodity prices have fallen and inflation has risen, going into recession in 2014. In 2015 the budget deficit hit a record high of 10.2% of GDP, and there has been stiff resistance to cuts through, for example, pension reform.

While cranking up the pressure on the fiscal accounts, economic crisis has also increased the potential risks posed by the financial needs of state enterprises or the liabilities of sub-national governments.

In January, the IMF reported on fiscal transparency in Brazil, identifying “weaknesses” in policy such as a failure to report liabilities, a lack of information on the cost of policies, an opaque relationship between central government and public banks and sub-national authorities, and corruption in large public enterprises.

The IMF’s recommendations informed a joint effort to reform fiscal management in the new economic climate by Brazil’s treasury and planning ministry (Seplan).

A greatly enhanced FRS has now been published to accompany this year’s budget, bringing Brazil into line with international best practice and standards on data quality.

This is more comprehensive, employs new methodologies, and analyses specific fiscal risks in more detail and with greater sensitivity – especially those that could affect outstanding debt. These include risks related to concessions, permits and public-private partnerships, lawsuits, and the financial assets of sub-national bodies such as federal loans.

A dedicated department has been created within the Secretaria do Tesouro Nacional to monitor risks permanently, the General Coordination of Planning and Fiscal Risks (COPEF/STN).

For up to date government news and international best practice follow us on Twitter @globegov

About Gavin O’Toole

Gavin O’Toole is a freelance writer and editor in London. He has written for leading newspapers, magazines, wire services and business schools about financial markets, business and regulation around the world. He has a particular interest in international relations, and a specialism in Latin American affairs. He has conducted research on this region’s political economy and has also published a number of books about its politics and natural environment. His latest title, Environmental Security in Latin America, will be published by Routledge in September 2017.

Partner content

“Blockchain sounds a bit like magic,” says Mark MacDonald. “It isn’t magic, but if you are interested in addressing foundational business, information management and accountability and transparency challenges, we think it is quickly emerging as the most powerful technology to do that.” The Global Lead Partner, Public Financial Management, at consultancy EY was addressing a […]

There was a remarkable moment during the filming of this video when a member of the camera crew felt compelled to thank the man being interviewed – the city of Detroit’s Chief Financial Officer – for the work that had been done to repair his city’s finances after it filed for bankruptcy in 2013. “As […]

A recent online seminar, hosted by Global Government Forum with the support of Mastercard, explored how civil servants can squeeze the shadow economy by encouraging electronic payments. And the benefits for public finances, research suggests, could be enormous Cash is king in the shadow economy, where transactions go unreported and taxes uncollected. But electronic payments […]

This is not fake news, but the UK has opened up a select committee parliamentary inquiry into fake news – its growth and its impact on different age groups and on elections. Damian Collins, the committee’s chair, said the rise of propaganda and fabrications is “a threat to democracy and undermines confidence in the media […]

Privacy Overview

This website uses cookies so that we can provide you with the best user experience possible. Cookie information is stored in your browser and performs functions such as recognising you when you return to our website and helping our team to understand which sections of the website you find most interesting and useful.

You can adjust all of your cookie settings by navigating the tabs on the left hand side.

Strictly Necessary Cookies

Strictly Necessary Cookie are enabled in order for the site to function correctly.

disable

If you disable this cookie, we will not be able to save your preferences. This means that every time you visit this website you will need to enable or disable cookies again.

3rd Party Cookies

This website uses Google Analytics to collect anonymous information such as the number of visitors to the site, and the most popular pages.

Keeping this cookie enabled helps us to improve our website.

_gat Google Analytics

_gads Google Advertisement

_ga Google Tag Manager

_gid Google Session ID

disable

Please enable Strictly Necessary Cookies first so that we can save your preferences!

Additional Cookies

This website uses the following additional cookies:

comment_author_{HASH} WordPress

comment_author_email_{HASH} WordPress

comment_author_url_{HASH} WordPress

disable

Please enable Strictly Necessary Cookies first so that we can save your preferences!

Cookie Policy

A cookie is a small file which asks permission to be placed on your computer’s hard drive. Once you agree, the file is added and the cookie helps analyse web traffic or lets you know when you visit a particular site. Cookies allow web applications to respond to you as an individual. The web application can tailor its operations to your needs, likes and dislikes by gathering and remembering information about your preferences.